Explore BrainMass

Explore BrainMass

    What is the expected rate of return on the portfolio using CAPM?

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    A portfolio that combines the risk-free asset and the market portfolio has an expected return of 25 percent and a standard deviation of 4 percent. The risk-free rate is 5 percent, and the expected return on the market portfolio is 20 percent. Assume the capital-asset-pricing model holds. What expected rate of return would a security earn if it had a 0.5 correlation with the market portfolio and a standard deviation of 2 percent?

    © BrainMass Inc. brainmass.com June 3, 2020, 6:34 pm ad1c9bdddf
    https://brainmass.com/business/capital-asset-pricing-model/65290

    Solution Preview

    A portfolio that combines the risk-free asset and the market portfolio has an expected return of 25 percent and a standard deviation of 4 percent. The risk-free rate is 5 percent, and the expected return on the market portfolio ...

    Solution Summary

    This solution determines the expected rate of return using CAPM.

    $2.19

    ADVERTISEMENT